Battle for free-market agenda is only half won

The Australian ^ | December 10, 2004 | Milton Friedman

[billorites]

IN the almost six decades since the end of World War II, intellectual opinion in the US about the desirable role of government has undergone a major shift. At the end of the war, opinion was predominantly collectivist. Socialism - defined as government ownership and operation of the means of production - was seen as both feasible and desirable. Those few of us who favoured free markets and limited government were a beleaguered minority.

In subsequent decades, opinion moved away from collectivism and toward a belief in free markets and limited government. By 1980 opinion had moved enough to enable Ronald Reagan to win the presidency on a quasi-libertarian agenda.

The collapse of the Soviet Union in 1989 delivered the final blow to the belief in socialism. Hardly anyone today, from the far Left to the far Right, regards socialism in the traditional sense of government ownership and operation of the means of production as either feasible or desirable. Those who profess socialism today mean by it a welfare state.

Over the same period, the actual role of government in the US also changed drastically -- but in precisely the opposite direction. In the first post-war decade, 1945 to 1955, government non-defence spending, federal, state and local, equalled 11.5 per cent of national income, varying from a high of 16 per cent in 1949 to a low of 8.5 per cent in 1952. From then on, spending rose rapidly. By 1983, government non-defence spending reached 30 per cent of national income, nearly triple the average amount in the first postwar decade. In addition, over the same period, government intrusion into business and private affairs exploded. No doubt the growth of government was one reason for the shift in public opinion. Big government in practice proved less attractive than big government in prospect.

Reagan's election brought the growth in government non-defence spending to a halt. As of 2003, government non-defence spending equalled 30 per cent of national income, the same as it was in 1983. Government intervention through regulation and controls did fall somewhat during Reagan's presidency, but has since resumed its steady rise.

To summarise: After World War II, opinion was socialist while practice was free market; currently, opinion is free market while practice is heavily socialist. We have largely won the battle of ideas; we have succeeded in stalling the progress of socialism, but we have not succeeded in reversing its course. We are still far from bringing practice into conformity with opinion. That is the overriding non-defence task for the second Bush term. It will not be an easy task, particularly with Iraq threatening to consume Bush's political capital.

[econ_grad]

Good rebuttal to anti-Reaginite Bush fans who claim that Bush is more conservative than Reagan. Non-defense related spending during Reagan years actually fell during Reagan's time. This is also a good rebuttal for people who think it is the Congress and not the President that is behind the increase. If that was the case, then a Democratic Congress led by Tip O'Neil should be preferable than the present bunch. O'Neil knew that Reagan would veto any non-defense related spending increases and knew there was no point in picking a fight with the most popular President ever.

[Nick Danger]

Bush is busily driving nails in the coffin of socialism, but he's doing it in a way that few see coming.

Slipped in alongside that "prescription drug benefit" were medical savings accounts. That is no small deal. The combination of a medical savings account and relatively cheap "catastrophic" health insurance provides as much coverage as most people need.

Fast-forward 20 years, and tens of millions will have these accounts. They become the bulwark against further attempts to socialize medicine, in the same way that IRA's and 401-K's led to a nation where more than half of the voters own stocks.

Bush's next act is the partial privatization of Social Security. Here comes another round of individually-owned savings accounts that will, in time, come to represent a powerful political force against further attempts to "socialize" the United States.

While the Democrats play checkers, Bush plays chess. Seven moves from now, the Democrats will understand why a Republican President took up the banner of prescription drugs.

[RWR8189]

When Milton Friedman speaks, I listen.

A truly brilliant man.

[swilhelm73]

The problem is that while the public is moderately in favor of cutting spending in general, it is mostly not in favor of cutting spending once you get into specifics...a lesson painfully learned in 1995/6.

[fporretto]

We won't have serious, lasting reductions in State power in America until we find some tactic to countervail the special-interest dynamic.

At this point, special interest groups own the budgeting process and the regulatory agencies. They also own quite a number of legislators, by virtue of their ability to marshal blocs of votes. Because their loyalists are highly motivated and concentrated on a short agenda, they will usually prevail against those of us with a far greater number of concerns, who stand to benefit personally to a far smaller degree if we win.

The one negative against the special-interest dynamic is that its grip on power will always be exceedingly thin: just a hair over 50% electorally. It can never be a true "mass movement," first because it's coalition-based, second because you can't reward 70% from the spoils of the remaining 30% effectively enough to motivate the diverse loyalists of the interest groups. To mortar up that weakness, the Party of the Special Interests -- the Democrats, of course -- uses campaigns intended to discourage non-special-interest voters from participation in the electoral process. This, too, must be studied and countered.

Much hard thought lies ahead.

Freedom, Wealth, and Peace,
Francis W. Porretto
Visit Eternity Road:
http://www.eternityroad.info

[Hardastarboard]

special interest groups own the budgeting process and the regulatory agencies. They also own quite a number of legislators, by virtue of their ability to marshal blocs of votes

The insurance companies are a special interest group that comes to mind in particular. They can't marshal large blocs of voters, but they do muster large blocs of money, which is nearly as good to a politician. And, their agendas are always "for your own good" (which coincidentally helps the insurance companies' pocketbooks), which neatly aligns them with the Demo-fascist do-gooders in this country.

[LowCountryJoe]

I think you've nailed it. Many people cannot see these things though because of all the chatter. Republicans (as a group) are deeply divided over various issues. The president has had to juggle so much foreign policy crap and appease both factions of his core constituents in order to get the opportunities to wield the nail pounding hammer for another term and no one seems to see it or appreciate it. Market based ideas will end up forcing the Democrats back to the center. This is a badly needed direction our country most go in. There may be a day several generations from now, where a voter with my ideals may be one of the fence setting voters who calls them-self a moderate.

[jackbob]

It can never be a true "mass movement," first because it's coalition-based,

Over all I strongly agree with what you have to say. But I have considerable difficulty with your use to the word "never" and your reason "because it is coalition-based." Obviously what you say here, may be a cause for continual difficulty. But such difficulties are often internal strengths for movements.

second because you can't reward 70% from the spoils of the remaining 30% effectively enough to motivate the diverse loyalists of the interest groups.

Here I completely disagree. Not being able to reward effectively to motivate diverse loyalties, may create a continual dilemma, but it is not self defeating for a mass movement. Actually, the opposite is self defeating. Effective rewarding, reduces the numbers in the listening audience, and quite often may eliminate entire targeted populations.

Of course, my disagreements with you may actually boil down to a difference in definition of "mass movement." There was however a point you raised on which I am totally ignorant.

To mortar up that weakness, the Party of the Special Interests -- the Democrats, of course -- uses campaigns intended to discourage non-special-interest voters from participation in the electoral process.

I do not know of what you are speaking of here. My bias is that you are probably right. I just don't know the how, when, and where. Please elaborate.

[jackbob]

They can't marshal large blocs of voters....

I don't agree. I concede that they with considerable difficulty, rarely marshal large blocks of voters. But that may be changing, as the fuller ramifications, of their strength and power in society, become realized, especially during times of future economic slow down.